The
issue presented by the Defendants motion to set aside the default judgment (the
Motion) is whether the Defendantsconduct amounts to excusable
neglect, for the purpose of Fed.R.Civ.P.
60(b). Subject to the prior
reimbursements hereinafter described, the court holds that the Defendants failure to
respond to the Plaintiffs complaint and motion for default judgment does not amount
to willful or reckless indifference toward a judicial proceeding; rather, the conduct is
excusable neglect. Therefore,
upon the Defendants reimbursement of the Plaintiff for his costs and attorneys
fees as described hereinafter, the court will sustain the Defendants Motion under
Rule 60(b).

BACKGROUND

On
February 1, 1999 James R. Westenhoefer (Westenhoefer), the Chapter 7 Trustee
for the bankruptcy estate of Pascual and Sara White (the Debtors), initiated
an adversary proceeding against the Defendants Pascual White, Sara White, and J.L. White
(collectively the Whites). Westenhoefers complaint alleges that the
Debtors transferred property to J.L. White,
and that the transfer should be voided because it was made fraudulently without valuable
consideration. See K.R.S. 378 and 11
U.S.C. 544.

Despite
proper service of process, the Whites failed to make a timely response to
Westenhoefers complaint and on March 22, 1999, Westenhoefer filed for default
judgment against the Whites. Again, the
Whites failed to respond, and on April 1, 1999, this court entered a default judgment
against the Whites which voided the Debtors real estate transfer to J.L. White. On May 22, 1999 the Whites filed this Motion,
which is now at issue.

JURISDICTION
& STANDARD OF REVIEW

Pursuant
to Fed.R.Civ.P. 55(c) and 60(b)(1) which apply to this case through Fed.R.Bankr.P. 7055
and 9024 respectively, the Whites have filed the Motion.
The decision to set aside a default judgment is left to the discretion of the trial
judge. Meganck v. Couts (In re
Couts) 188 B.R. 949, 951 (Bankr.E.D.Mich. 1995).

ANALYSIS

1.
Fed.R.Civ.P. 60(b)(1)

The
motion hinges on the application of Fed.R.Civ.P. 60(b)(1) as it calls for the judgment to
be set aside on the grounds of mistake, inadvertance, or excusable neglect
(p.2 of Whites Verified Motion to Re-Open Case and Set Aside Default
Judgment (sic)). Rule 60(b)(1)
states as follows:

(b)
Mistakes; Inadvertance; Excusable Neglect; Newly Discovered Evidence; Fraud; etc. On motion and upon such terms as are just, the
court may relieve a party or a partys legal representative from a final judgment,
order, or proceeding for the following reasons:

(1)
mistake, inadvertance, surprise, or excusable neglect;

The
Motion does not allege any type of circumstance involving a mistake or inadvertance such
as bad service of process, nor does it indicate any type of surprise. Instead, the circumstances described in the motion
involve the deteriorating health of the Whites counsel during the early portion of
this adversary proceeding which inhibited the Whites from responding to
Westenhoefers complaint and motion for default judgment. This court finds excusable neglect to
be applicable to the facts in this case.

2.
The United Coin Test

The
application of Rule 60(b)(1) is a commonly litigated issue.
In 1983, the Sixth Circuit developed a three factor test to deal with this popular
issue. See United Coin Meter Co. v.
Seaboard Coastline R.R., 705 F.2d 839 (6th Cir. 1983).
This test is consistent with the Supreme Courts test for deciding Rule 60(b)
issues. See Pioneer Inv. Sevrs. Co. v.
Brunswick Assocs. Limited Partnership, 507 U.S. 380, 113 S.Ct 1489, 123 L.Ed.2d. 74
(1993). Therefore, this court finds it appropriate to apply the United
Coin test in this case.

Using
the United Coin test, this court will examine three factors: (1) the culpability of
the Whites conduct; (2) whether Westenhoefer will be prejudiced if the judgment is
set aside; and (3) whether the Whites have a meritorious defense against
Westenhoefers complaint. Id.

1. Was the
Whites Conduct Culpable?

This
court finds that the Whites failure to submit responses to Westenhoefers pleadings does not constitute culpable conduct in
this case. All parties agree that the
relevant conduct at issue is the Whites failure to respond to Westenhoefers
complaint and the Motion. However, the
parties disagree on how to characterize the Whites conduct. Therefore, the issue to be resolved is whether the
Whites behavior should be characterized as culpable or excusable neglect.

Westenhoefer
characterizes the Whites behavior as culpable.
He argues that the Whites chose not to communicate with counsel and made no
effort to follow his case (emphasis added). To
support his argument, he cites two Bankruptcy cases. (Trustees Reply to
Affidavits in Support of Motion to Set Aside Default Judgment p.3). However, this court finds that neither case
cited by Westenhoefer can be used to establish culpability in the Whites case.

The first case cited by Westenhoefer is In re Nutri*Bevco, Inc., 117 B.R. 771 (Bankr. S.D.N.Y. 1990). Although Nutri*Bevco is not a Sixth Circuit
case, the case is instructive because its facts are similar to the facts in this case. However, a crucial difference between Nutri*Bevco
and this case exists. In Nutri*Bevco,
the movants never claim that a miscommunication existed between the lawyers and
themselves. But in this case the Whites claim
to have been under the impression that the necessary pleadings to prevent a default
judgment had been filed and were unaware that their attorney had not done so because of
his health. The second case cited is Matter
of Frankina, 29 B.R. 983 (Bankr. E.D.Mich. 1983).
In Matter of Frankina, the facts involve excusable neglect
within the context of former Bankruptcy Rule 906(b)(2) rather than Rule 60(b)(1). Bankruptcy Rule 906(b)(2) is not at issue in the
Whites case. This court finds
neither Nutri*Bevco nor Matter of Frankina apply to this case, and
consequently holds that the Whites behavior did not exceed the scope of excusable
neglect.

Instead,
this court finds that the correct characterization of the Whites conduct is
excusable neglect. The Sixth Circuit
generally defines culpable conduct as conduct which displays an intent to thwart
judicial proceedings or a reckless disregard for the effect of its conduct on those
proceedings. INVST Financial Group
v. Chem Nuclear Systems, 815 F.2d 391, 399 (6th Cir. 1987) (alteration in
original) (quoting Shepard Claims, 796 F.2d at 194).
Furthermore, in Rule 60(b) cases, the Sixth Circuit standard for culpable conduct
is even more stringent. See, e.g., Manufacturers
Indus. Relations Assn v. East Akron Casting Co., 58 F.3d 204, 209 (6th
Cir. 1995) (involving a defendant who took no action for eleven months after the default
judgment was entered and offered no explanation for his inaction).

While
the Whites may not be the most diligent Defendants ever in an adversary proceeding, to
hold that their conduct was culpable and intended to thwart a judicial proceeding is a bit
of a reach. They got their act together
within two months of the entry of the default judgment, compared to the eleven months
taken by the defendant in East Akron Casting.
In addition, the Whites initial attorney had been suffering with
deteriorating health during some or all of the early portion of this proceeding. The Whites have since retained new counsel. Under these circumstances, this court finds that
the Whites conduct amounts to excusable neglect.

2.
Will Westenhoefer be Prejudiced if the Default Judgment is Set Aside?

This
court finds that Westenhoefer will not be
prejudiced if the default judgment is set aside. The
burden of proving such prejudice lies with Westenhoefer.
In re Baskett, 219 B.R. 754, 760 (6th Cir. BAP 1998).
Westenhoefer does not address the issue of prejudice in his pleadings. Consequently, this court concludes that no
prejudice will result by setting aside the default judgment against the Whites.

3.
Have the Whites Raised a Meritorious Defense?

This
court finds that the Whites verified motion raises potentially meritorious defenses. Westenhoefers complaint alleges that
the Debtorss real estate transfer to J.L. White was fraudulent and without
consideration. As a defense, the Whites
respond by saying that J.L. White paid them $20,000 for the real property at issue. As proof of their defense, the Whites offer copies
of a promissory note and two deposit slips of $10,000 a piece made around the time of the
sale. In addition, the Whites each offer an
affidavit of their own testimony which substantiates their version of the facts and
refutes Westenhoefers claim. While the
court withholds comment on whether the Whites defense will succeed in trial, this
court will hold that the Whites defense is sufficiently meritorious for the purposes
offered here.

3.
Costs and Attorneys Fees

While
the Whites were not culpable under 60(b), they nonetheless sat idly on their hands as
Westenhoefer, acting reasonably, filed for and obtained the default judgment; in addition,
he contested the Motion. Essentially, the
Whites have forced Westenhoefer to be like a hamster in the wheel during this proceeding,
working hard and expending much time and energy only to end up right back where he
started. This is an inequitable situation for
Westenhoefer, and this court feels it must be remedied.

In
granting a motion to vacate a default judgment, a court may impose reasonable conditions
upon the granting of the motion. In re
Ireco Industries, Inc., 2 B.R. 76 (Bankr. D.Or. 1979).
The most typical of these conditions is the reimbursement of attorneys fees
and costs to the party who obtained the default judgment.
See, e.g., In re BNI Telecommunications, Inc., 236 B.R. 238
(Bankr. N.D.Ohio, 1999); Thorpe v. Thorpe, 364 F.2d 692 (D.C.Cir. 1999). Therefore, while this court will continue to
follow the United Coin test with regards to the Motion, it does so only after the
Whites have reimbursed Westenhoefer for the attorneys fees and costs which he
incurred in filing for and obtaining the default judgment, and contesting the Whites
motion to set aside the default judgment (the Expenses).

To
determine the amount of the Expenses, Westenhoefer shall file and serve an affidavit
describing the Expenses, within fifteen days of the entry hereof. The Whites shall then have fifteen days to pay the
Expenses. If the Whites object to any part of
the Expenses, and such objection is not sustained by the court in full, then the Whites
shall further reimburse Westenhoefer his attorneys fees and costs with regard to any
such objection within fifteen days of the entry of the order ruling on the Whites
objection. Westenhoefer shall file a pleading
herein acknowledging the Whites payment of the expenses. Upon the filing thereof, this court will enter its
order sustaining the Motion, and the Whites shall file their answers within thirty days
after such payment. However, if the Expenses
are not fully paid in accordance with the terms hereof, the Whites motion will be
overruled.

Dated
this ______ day of September.

By
the court 

JOSEPH M. SCOTT,
JR.

U.S. BANKRUPTCY
JUDGE

Copies
to:

Ann E.
Samani, Esq.

Robert
M. Pfeifer, Esq.

John
T. Hamilton, Esq.

U.S.
Trustee

UNITED STAES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

CORBIN

IN
RE:

PASCUAL
RAYMOND WHITE, SR

SARA FLORENCE WHITE
CASE NO. 97-61262

DEBTOR(S)
CHAPTER 7

JAMES
R. WESTENHOEFER

Trustee
for the bankruptcy estate

of
Pascual White and Sara White

6.
ADV. NO. 99-6007

J.L. WHITE

PASCUAL WHITE, SR.

SARA
FLORENCE WHITE
DEFENDANTS

ORDER

In
accordance with the memorandum opinion entered simultaneously herewith, the Plaintiff,
James R. Westenhoefer (Westenhoefer), is hereby ordered to file and serve
within fifteen days of the entry hereof an affidavit (the Affidavit)
describing the attorneys fees and costs which he incurred in filing for and
obtaining the default judgment (Doc. #6), and contesting J. L. White, Pascual White, Sr.,
and Sara Florence Whites (collectively the Whites) motion to set aside
the default judgment (Docs. # 10 & 19) (the Expenses).

Upon
the filing of the Affidavit, the Whites shall pay the Expenses within fifteen days from
the date of service of the Affidavit. If the
Whites object to any part of the Expenses, and such objection is not sustained by this
court in full, then this court will enter an order for the Whites to further reimburse
Westenhoefer his attorneys fees and costs with regard to any such objection within
fifteen days of the entry of the order ruling on the Whites objection.

Upon
payment of the Expenses, Westenhoefer is further ordered to file a pleading acknowledging the Whites payment of the
expenses.